Exam 12: Multinational Accounting: Issues in Financial Reporting and Translation of Foreign Entity Statements

Infinity Corporation acquired 80 percent of the common stock of an Egyptian company on January 1,20X8.The goodwill associated with this acquisition was $18,350.Exchange rates at various dates during 20X8 follow: Goodwill suffered an impairment of 20 percent during the year.If the functional currency is the U.S.dollar,how much goodwill impairment loss should be reported on Infinity's consolidated statement of income for 20X8?

If the restatement method for a foreign subsidiary involves remeasuring from the recording currency into the functional currency,then translating from functional currency to U.S.dollars,the functional currency of the subsidiary is: I.the U.S.dollar. II.the recording currency unit. III.a third country's currency.

On January 2,20X8,Polaris Company acquired a 100% interest in the capital stock of Ski Company for $3,100,000.Any excess cost over book value is attributable to a patent with a 10-year remaining life.At the date of acquisition,Ski's balance sheet contained the following information: Ski's income statement for 20X8 is as follows: The balance sheet of Ski at December 31,20X8,is as follows: Ski declared and paid a dividend of 20,000 FCU on October 1,20X8.Spot rates at various dates for 20X8 follow: Assume Ski's revenues,purchases,operating expenses,depreciation expense,and income taxes were incurred evenly throughout 20X8. -Refer to the above information.Assuming the U.S.dollar is the functional currency,what is Ski's net income for 20X8 in U.S.dollars (include the remeasurement gain or loss in Ski's net income)?

Infinity Corporation acquired 80 percent of the common stock of an Egyptian company on January 1,20X8.The goodwill associated with this acquisition was $18,350.Exchange rates at various dates during 20X8 follow: Goodwill suffered an impairment of 20 percent during the year.If the functional currency is the Egyptian Pound,how much goodwill impairment loss should be reported on Infinity's consolidated statement of income for 20X8?

Elan,a U.S.corporation,completed the December 31,20X8,foreign currency translation of its 70 percent owned Swiss subsidiary's trial balance using the current rate method.The translation resulted in a debit adjustment of $25,000.The subsidiary had reported net income of 800,000 Swiss francs for 20X8 and paid dividends of 50,000 Swiss francs on September 1,20X8.The translation rates for the year were: The January 1 balance of the Investment in the Swiss subsidiary account was $1,600,000.Elan acquired its interest in the Swiss subsidiary at book value with no differential or goodwill recorded at acquisition. Elan's Investment in Swiss subsidiary account at December 31,20X8,is:

Michigan-based Leo Corporation acquired 100 percent of the common stock of a British company on January 1,20X8,for $1,100,000.The British subsidiary's net assets amounted to 500,000 pounds on the date of acquisition.On January 1,20X8,the book values of its identifiable assets and liabilities approximated their fair values.As a result of an analysis of functional currency indicators,Leo determined that the British pound was the functional currency.On December 31,20X8,the British subsidiary's adjusted trial balance,translated into U.S.dollars,contained $17,000 more debits than credits.The British subsidiary reported income of 33,000 pounds for 20X8 and paid a cash dividend of 8,000 pounds on October 25,20X8.Included on the British subsidiary's income statement was depreciation expense of 3,500 pounds.Leo uses the fully adjusted equity method of accounting for its investment in the British subsidiary and determined that goodwill in the first year had an impairment loss of 25 percent of its initial amount.Exchange rates at various dates during 20X8 follow: -Based on the preceding information,the receipt of the dividend will result in a credit to the investment account for:

On January 2,20X8,Polaris Company acquired a 100% interest in the capital stock of Ski Company for $3,100,000.Any excess cost over book value is attributable to a patent with a 10-year remaining life.At the date of acquisition,Ski's balance sheet contained the following information: Ski's income statement for 20X8 is as follows: The balance sheet of Ski at December 31,20X8,is as follows: Ski declared and paid a dividend of 20,000 FCU on October 1,20X8.Spot rates at various dates for 20X8 follow: Assume Ski's revenues,purchases,operating expenses,depreciation expense,and income taxes were incurred evenly throughout 20X8. -Refer to the above information.Assuming Ski's FCU is the functional currency,what is the amount of patent amortization for 20X8 that results from Polaris's acquisition of Ski's stock on January 2,20X8.Round your answer to the nearest dollar.

Nichols Company owns 90% of the capital stock of a foreign subsidiary located in Ireland.As a result of translating the subsidiary's accounts,a debit of $160,000 was needed in the translation adjustments account so that the foreign subsidiary's debits and credits were equal in U.S.dollars.How should Nichols report its translation adjustments on its consolidated financial statements?

On January 2,20X8,Polaris Company acquired a 100% interest in the capital stock of Ski Company for $3,100,000.Any excess cost over book value is attributable to a patent with a 10-year remaining life.At the date of acquisition,Ski's balance sheet contained the following information: Ski's income statement for 20X8 is as follows: The balance sheet of Ski at December 31,20X8,is as follows: Ski declared and paid a dividend of 20,000 FCU on October 1,20X8.Spot rates at various dates for 20X8 follow: Assume Ski's revenues,purchases,operating expenses,depreciation expense,and income taxes were incurred evenly throughout 20X8. -Refer to the above information.Assuming the U.S.dollar is the functional currency,what is the amount of patent amortization for 20X8 that results from Polaris's acquisition of Ski's stock on January 2,20X8?

On January 2,20X8,Polaris Company acquired a 100% interest in the capital stock of Ski Company for $3,100,000.Any excess cost over book value is attributable to a patent with a 10-year remaining life.At the date of acquisition,Ski's balance sheet contained the following information: Ski's income statement for 20X8 is as follows: The balance sheet of Ski at December 31,20X8,is as follows: Ski declared and paid a dividend of 20,000 FCU on October 1,20X8.Spot rates at various dates for 20X8 follow: Assume Ski's revenues,purchases,operating expenses,depreciation expense,and income taxes were incurred evenly throughout 20X8. -Refer to the above information.Assuming the U.S.dollar is the functional currency,what is the balance in Polaris's investment in foreign subsidiary account at December 31,2008?

All of the following are benefits the U.S.would gain from the adoption of globally consistent accounting standards except for:

All of the following describe the International Accounting Standard Board (IASB)except for:

For each of the items listed below,when the foreign currency strengthened relative to the U.S.dollar during the year,what is the effect on the cumulative translation adjustment (assuming a credit balance at the beginning of the year).

The Canadian subsidiary of a U.S.company reported cost of goods sold of 50,000 C$,for the current year ended December 31.The beginning inventory was 15,000 C$,and the ending inventory was 10,000 C$.Spot rates for various dates are as follows: Assuming the U.S.dollar is the functional currency of the Canadian subsidiary,the remeasured amount of cost of goods sold that should appear in the consolidated income statement is

Stack Company is a subsidiary of Pile Company and is located in Valparaíso,Chile,where the currency is the Chilean Peso.Data on Stack's inventory and purchases are as follows: The beginning inventory was acquired during the fourth quarter of 20X7,and the ending inventory was acquired during the fourth quarter of 20X8.Purchases were made evenly over the year.Exchange rates were as follows: -Refer the information provided above.Assuming the U.S.dollar is the functional currency,what is the amount of Stack's cost of goods sold remeasured in U.S.dollars?

Parent Company's wholly-owned subsidiary,Son Corporation,maintains its accounting records in Danish krone.However,because all of Son's branch offices are in Sweden,its functional currency is the Swedish krona.Remeasurement of Son's 20X3 financial statements resulted in a $3,200 loss,and translation of its financial statement resulted in a $2,600 loss.What amount should Parent report as a loss in its income statement for the year ended December 31,20X3?

Which of the following statements is true regarding the SEC's timeline for convergence?

In cases of operations located in highly inflationary economies:

On January 2,20X8,Polaris Company acquired a 100% interest in the capital stock of Ski Company for $3,100,000.Any excess cost over book value is attributable to a patent with a 10-year remaining life.At the date of acquisition,Ski's balance sheet contained the following information: Ski's income statement for 20X8 is as follows: The balance sheet of Ski at December 31,20X8,is as follows: Ski declared and paid a dividend of 20,000 FCU on October 1,20X8.Spot rates at various dates for 20X8 follow: Assume Ski's revenues,purchases,operating expenses,depreciation expense,and income taxes were incurred evenly throughout 20X8. -Refer to the above information.Assuming Ski's FCU is the functional currency,what is the amount of translation adjustment that appears on Polaris's consolidated financial statements at December 31,20X8?

Under the temporal method,which of the following is usually used to translate monetary amounts to the functional currency? I.The current exchange rate II.The historical exchange rate III.Average exchange rate